On October 30, the Federal Reserve announced a 0.25% rate cut, marking its second consecutive reduction this year, bringing the federal funds rate target range to 3.75%-4%. Ray Sharma-Ong, Global Deputy Head of Multi-Asset Client Solutions at Aberdeen Investments, noted that Fed Chair Powell's remarks suggest the central bank expects the US government shutdown may extend into December. Once the shutdown ends and macroeconomic data resumes publication, it could support a December rate cut.

With the Fed meeting concluded, market attention is shifting to corporate earnings and the upcoming US-China trade negotiations in South Korea. Sharma-Ong believes these talks, scheduled for today, will likely influence November 2025 market sentiment. Key discussion topics include chip export controls, rare earth supplies, tariff structures, fentanyl-related measures, and trade of critical goods such as soybeans and Nvidia products. The finalized TikTok deal will also be on the agenda. Progress in these areas may boost US equities, as well as China's broader market and tech sector.

The Fed's 25-basis-point cut underscores its independence from political pressure, reinforcing that decisions remain data-driven rather than politically influenced. However, the central bank acknowledged that the prolonged government shutdown has limited access to economic data. Without clear economic signals, the Fed refrained from providing explicit forward guidance on a potential December rate cut.

Additionally, the Fed announced that quantitative tightening will end on December 1, 2025, with mortgage-backed securities (MBS) reinvestments shifting to Treasuries from that date. This timeline disappointed markets, which had anticipated an earlier November 2025 implementation. Powell's hawkish tone during the press conference triggered negative reactions in equity and rate markets, reinforcing the "bad news is good news" narrative—weaker economic data could prompt further monetary easing, supporting stocks.

Sharma-Ong highlighted that the government shutdown, coupled with recent corporate earnings releases, has amplified concerns over layoffs and hiring challenges. The labor market appears volatile, and once economic reports resume, employment data may show weakness. Meanwhile, limited data and the Fed's lack of commitment to a December cut suggest short-term rates will stay elevated, bolstering the US dollar. This environment is unfavorable for small- and mid-cap companies, which typically hold higher proportions of floating-rate debt.